Company Voluntary Arrangement (CVA)
What is a Company Voluntary Arrangement (CVA)?
A company voluntary arrangement is a recognised legal procedure, under the provisions of the Insolvency Act of 1986 that enable a company to enter into a binding agreement with its creditors detailing how the company's debts and liabilities will be dealt with, and allows the directors to retain the control of the company.
In essence a company voluntary arrangement allows a company with historical cash flow problems to repay its liabilities, either in part or in full (including the Inland Revenue and VAT) over a period of time. Once the company's liabilities have been restructured any monies generated by the company e.g. book debts can be used as working capital rather than paying its old debts.
Very rarely the company can apply to the Court for a Moratorium to "ring fence" its assets. Further details of this procedure and when it is applicable are available on request.
How is a Company Voluntary Arrangement implemented?
A company voluntary arrangement requires the approval of a majority of 75% of the voting creditors. If approved, the CVA binds all creditors who were sent notice of the meeting irrespective of how they voted.
FAQ's
How much does the company repay its creditors?
Will the bank, VAT and the Inland Revenue support the CVA?
In essence a CVA allows a company with historical cash flow problems to repay its liabilities, either in part or in full (including the Inland Revenue and VAT) over a period of time. Once the company's liabilities has been restructured any monies generated by the company e.g. book debts can be used as working capital rather than paying its old debts.
In short, we have never had a problem with a CVA proposal providing it normally passes the common sense test. As the bank is normally secured (as are any finance companies), it remains outside the CVA and with all pre CVA creditors showing in the segregated fund, the pressure is taken off, because you have "fresh" and unallocated working capital coming in to the company.
Will suppliers still supply the company?
It is our experience that nearly all suppliers will continue to support a company in a CVA (even though most directors will assure us they will not! - Please call for a full explanation of this point).
Does anyone interfere with the running of the company during a CVA?
As long as the company adheres to the terms of the CVA, the company is run under the control of the directors without any outside interference. There are certain reporting requirements to a CVA Supervisor, which are not normally onerous.
Please feel free to contact our sponsored company helpline if you have any questions.